US economic recovery finally taking hold

American flag

Just in case you missed it: the U.S. economy is back.

After a long, dismal stretch last winter that saw gross domestic product shift abruptly into reverse, the latest government data shows the economy has bounced back sharply in 2014, and that momentum is expected to carry into next year.

The Commerce Department said Tuesday that GDP expanded at a surprisingly strong 5.0 percent annual rate in the third quarter-the fastest pace since the third quarter of 2003.

The improvement is more than a one-time surge. Across a broad range of data, the U.S. economy continues gradually to gain strength.

To be sure, it's been a long slog back from the Great Recession, and the recovery isn't about to break any historical records.

Millions of discouraged workers have given up looking for a job, and wage gains have been sluggish for those who have one. Though housing starts and home sales are gradually improving, they're well off peak levels seen before the mortgage bubble burst in 2007.

But there are signs that the deep slide has finally given way to what economists call a "virtuous cycle," in which improvement in one part of the economy feeds into the others, creating a self-sustaining expansion.

This year's convincing job gains are boosting consumer confidence and-more importantly-helping to shore up household finances. Americans continue to pay down debt, which together with low interest rates has helped reduce the cost of paying off mortgages, car loans and other forms of borrowing. Lower borrowing costs have helped boost savings.

And the recent surprise crash in oil prices has sent gasoline prices tumbling, putting extra cash in the pockets of American consumers.

All of which has helped free up money for spending, giving a lift to retail sales and helping to support an ongoing, if sluggish, housing recovery.

Few economists are expecting the pace of the last two quarters to continue, though, with most forecasting 2.5 to 3 percent growth next year. Much, of course, depends on whether the Federal Reserve decides to begin raising interest rates all the way back to more "normal" levels, and how quickly those rates begin to rise.

And while the U.S. seems to be back on its feet, the economy in the rest of the world is stumbling again. China's once red hot growth pace has slowed, and long-running efforts to revive growth in Europe and Japan continue to come up short. That-along with a stronger dollar-could hurt demand for U.S. experts.

But for now, it looks like much of the U.S. economic recovery is solidly on track.

-By CNBC's John Schoen. Follow him on Twitter @johnwschoen or email him.

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